All that investors need to know about emerging mining player, Azure Minerals

  • Jun 17, 2019 AEST
  • Team Kalkine
All that investors need to know about emerging mining player, Azure Minerals

Azure Minerals Limited (ASX: AZS) is an emerging mineral exploration company, currently focused on developing mining projects located in North America with a focus on Mexico.

Mexico has a long-term mining history of over 500 years with a well-established mining culture resulting to a strong government, bureaucratic and public support for mining. Besides, the taxation rates are low, compared to other Latin American Jurisdictions, which makes for an attractive commercial environment. The country is also characterised by an outstanding geology and provides an easy availability of skilled and experienced workforce.

Azure Minerals is diligently working to deliver value for shareholders through progressing its diversified portfolio which comprises around five high quality precious and base metal projects in northern Mexico. The projects are discussed below.

  • Flagship Project- The Oposura Project (100%-owned): A rich Zinc-Lead-Silver Deposit

The company is targeting to bring Oposura project into production by end of 2020 or early 2021.The project is located in the northern Mexican state of Sonora and underpinned by the following characteristic highlights:

  • JORC Mineral Resource Estimate (MRE) of 3.1Mt @ 5.0% Zn, 2.7% Pb with 85% classified as Indicated resources and 15% as Inferred resources. (8 May 2019 Update)
  • Simple mining methods comprising shallow open pits, underground room and pillar extraction;
  • Standard sulphide floatation processing, and
  • Significant exploration upside with potential to at least double the current mineral resource.

The company completed a Scoping Study at Oposura and reported positive encouraging results in October 2018. The Study confirmed that Oposura was an economically and technically robust, high-margin project with its key features including low operating and capital costs, high-value concentrate, strong operating cash flows and a 16-month payback period.

Most importantly, Oposura is expected to be in the lowest cost quartile of zinc producers worldwide in term of C1 cash cost expenses.

The results of the Scoping study are briefed as below.

The study also established that the optimal mining rate will be approximately 500ktpa at Life of Mine (LOM) average grades of 4.6% Zn, 2.6% Pb and 15.9g/t Ag.

In early February 2019, the company commenced the Feasibility Study (FS) including East Zone mineral resource estimate update, drilling into potential aquifers located on the Oposura concessions, commencement of the geotechnical study to enable calculation of Ore Reserves, selection of metallurgical samples for FS, assessment of engineering proposals, site visits by potential concentrate offtake parties and other works.

The Phase 2 drilling program at Oposura was completed in early 2019 and the results have been recently disclosed on 8 May 2019. Phase 2 comprised 58 diamond drill holes (4,567m), in addition to the Phase 1 program that had 173 holes (11,109m). The company has reported that successful infill and extensional drilling have increased the East Zone Mineral Resource by 20% to 3.1 million tonnes @ 5.0% Zn & 2.7% Pb, indicating potential to increase the mine life of the project as part of the Feasibility Study currently in progress.

Lately on 5 June 2019, Azure Minerals informed the stakeholders that the Board had approved the commencement of trial mining and processing of high-grade mineralisation at Oposura Project. It is expected to start in the September quarter of 2019.

Financing: Azure has secured funding for the trial mining through signing of a binding commitment with the company’s major shareholder Deutsche Balaton for it to provide AUD 2,000,000 in funding via a convertible note.

The convertible note will have a term of two years at an interest rate of 12.5% per annum.

  • The Alacrán Project (100%-owned, Teck Resources Limited earning back an initial 51%): Silver-Gold-Copper

The project is situated within the Laramide Copper Province of North America’s most prolific copper-producing district. Azure’s initial exploration work at Alacrán had identified gold and silver deposits (epithermal) – Mesa de Plata and Loma Bonita, with a total resource of 150,000oz gold and 32Moz silver.

On 16 May 2019, the company informed that it had accepted a right of first offer proposal from Minera Teck S.A. de C.V., a subsidiary (100%-owned) of Canada-based resource company, Teck Resources Limited, to consolidate ownership of the Alacrán Project. Teck Resources would become a substantial shareholder of AZS.

On 6 May 2019, Azure reported that Teck had completed the Phase 2 drilling program comprising 21 holes for 10,540.4m with full assays received confirming porphyry copper mineralisation at Cerro Alacrán with broad zones of visible chalcopyrite intersected.

  • OSO Negro Project (100%-owned): Silver-Gold

The Oso Negro prospect, situated 70 km north of Azure’s Oposura Project, comprises two concessions covering 1,275 ha that host epithermal quartz veining and historical mine workings.

The reconnaissance sampling of veins, selvages and dumps by the company returned high-grade gold (~ 100.5g/t Au) and silver (~ 2,680g/t Ag).

  • Sara Alicia Project (100%-owned): Gold-Cobalt

The company is investigating and negotiating the potential purchase or joint venture for this property by conducting site visits and inspections of the drill core.

  • Promontorio Project (100%-owned): Copper-Gold-Silver

No work undertaken. Azure is currently seeking a partner to proceed with further exploration.

During the quarter ended 31 March 2019, there were AUD 1.66 million cash outflows from operating activities including exploration & evaluation (AUD 1.12 million), and staff and corporate costs (AUD 558K). The net cash stood at AUD 1.76 million at quarter close.

Stock Performance:

Azure Minerals has a market capitalisation of around AUD 9.99 million with approximately 111 million outstanding shares. On 17 June 2019, the AZS stock was trading at AUD 0.090.


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